Oil at $100 supports Saudi Arabia’s Q1 2022 budget, economy: Analysts

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The rise in oil prices to $100 per barrel (bbl) backed Saudi Arabia’s actual budget in the first quarter of 2022, and will further support the Kingdom maintain its economic growth and face inflation, economic analysts told Argaam.

Economic writer Saud Al-Mutair expects the Saudi economy to maintain growth at a pace above 7%, especially with average oil prices steady at $100 level, through 2022 and 2023. The other driver is the private sector’s unprecedented accelerated growth, which is the main pillar of the Vision 2030 success.

Elsewhere, economic analyst Ahmed Al-Shehri said the Saudi budget beat consensus estimates in terms of revenue, gaining 36% over Q1 2021, buoyed by oil prices above the $100-mark. Growth in oil and non-oil revenue by 58% and 7% year-on-year, respectively, was another driver.

He expects crude prices to hold above $100 bpd until the end of this year. They played a key role in the Saudi budget, Al-Shehri elaborated. This will also allow more options for financial policy makers in the Kingdom, in terms of the dynamics used to face potential inflation waves, in case global market conditions remain unchanged.

Al-Mutair added that the actual revenue rose 15% to SAR 16 billion, if the estimated budget is divided into four similar quarters. It was expected to record an estimated revenue of SAR 261.25 billion in the first quarter.

The estimated and actual expenditure for the first quarter of the year reached SAR 238.75 billion and SAR 220 billion, respectively, implying an unspent amount of SAR 18.75 billion, Al-Mutair said.

These figures indicate that the fiscal policy will be more expansionary in the coming quarters, the analyst said, adding that an expansionary fiscal policy is necessary to maintain growth commensurate with the programs of Vision 2030. However, the policy of raising interest rates is deflationary.

On the other hand, Al-Shehri considered the improved non-oil performance as an indicator of local economic recovery, especially after all economic entities resumed operations in various sectors, such as aviation, tourism, Umrah, wholesale, retail and financial.

These factors together had a big role in boosting revenue in the general budget. Non-oil revenue exceeded its 2021 level.

Al-Shehri expected the Saudi gross domestic product (GDP) to grow by 7% after the Kingdom fully opened to tourists, especially during the Hajj season.

Meanwhile, Al-Mutair forecast that oil and non-oil revenue will continue to grow. Thus, revenues would reach nearly SAR 1.150 trillion, with a surplus of around SAR 200 billion if government spending continues as planned at SAR 955 billion.

He also expected an increase in spending to SAR 1 trillion.

The Saudi Ministry of Finance announced Q1 2022 budget with revenue of SAR 278 billion and expenditure of SAR 220.5 billion. The Kingdom posted a surplus of SAR 57.5 billion, Argaam reported.